by Hardwick Legal | Dec 8, 2016 | Purpose Built (LexisNexis)
<p><a data-sf-ec-immutable="" href="http://ln-multi-web.cloudapp.net/images/default-source/purpose-built/48354991_l.jpg"></a></p><p><i><a data-sf-ec-immutable="" href="http://www.atkinchambers.com/people/index.cfm?id=548" target="_blank">Mischa Balen</a>, </i>barrister<i> at Atkin Chambers, explores the court’s approach to concurrent delay in Saga Cruises BDF Ltd v Fincantieri SpA <a data-sf-ec-immutable="" href="http://www.lexisnexis.com/uk/lexispsl/commercial/document/316762/5KCM-1VT1-F0JY-C0T2-00000-00" target="_blank">[2016] EWHC 1875 (Comm)</a>, <a data-sf-ec-immutable="" href="http://www.lexisnexis.com/uk/legal/docview/getDocForCuiReq?lni=5KX9-9XF1-DYBP-T2VK&csi=274714&oc=00240&perma=true&elb=t" target="_blank">167 ConLR 29</a>. In his view, the decision sees the application of the orthodox rules of causation, and there is an important distinction between one-off and continuing events.</i></p><h3><b>Background</b></h3><p>This summer’s decision in Saga adopts a welcome back-to-basics approach to questions of concurrent delay. (The court also made some findings/observations concerning causation, contributory negligence, third party losses and liquidated damages –
for more on those see <a data-sf-ec-immutable="" href="http://www.lexisnexis.com/uk/lexispsl/construction/document/412012/5KDW-DMG1-DYW7-W0BT-00000-00" target="_blank">LexisPSL’s case analysis of 9 August 2016</a>.)<i><br></i></p><p><i>Saga</i> was a case where the court had to consider the ‘concurrent effect of sequential delay events’, to borrow a phrase from the Society of Construction Law’s Delay and Disruption Protocol, in order to determine whether the employer
was entitled to levy liquidated damages. The contractor submitted that because the project had been delayed by two causes, one of which was the employer’s fault and one of which was the contractor’s fault, the employer could not levy liquidated
damages. The employer submitted that the project was already delayed by events which were the contractor’s fault and that the employer’s failings did not therefore actually affect the project’s completion date. As such, it should
be entitled to levy liquidated damages when the contractor missed this date.</p><p>Sara Cockerill QC in the Commercial Court held for the employer, reasoning that: “<i>unless there is a concurrenc</i></p>
Source: LexisNexis Purpose Built
Concurrent delay: a back-to-basics approach
by Hardwick Legal | Nov 21, 2016 | Purpose Built (LexisNexis)
The European Commission is conducting an evaluation of Regulation (EC) 1907/2006 on the Registration, Evaluation, Authorisation and Restriction of Chemicals (REACH), ie the main EU law on chemicals. How will the European Commission’s Regulatory Fitness and Performance Programme (REFIT) revaluation impact on the chemicals regime in the EU?
Caroline May, head of safety and environment and Emilia Richards, associate, at Norton Rose, explain the background, and say the 2017 REACH review and the chemicals fitness check will assess the relevance, coherence, effectiveness and efficiency of the EU legislative framework on chemicals.
What is the background to the review?
REACH came into force in June 2007, consolidating in excess of 40 regulations which previously formed the EU chemicals regime. REACH places obligations on Member States, manufacturers, importers, suppliers and downstream users to ensure that only
safe chemical substances are marketed in the EU.The REACH REFIT Evaluation 2017 (the 2017 Review) is being carried out as part of the European Commission’s obligation under REACH, art 117(4) to report on the functioning of REACH every five
years. The 2017 Review must cover the following compulsory evaluation criteria:
- effectiveness
- efficiency
- relevance
- coherence, and
- EU added value
What were the findings of the first REACH Review in 2013, and what key developments have there been since then?
The findings of the first REACH Review in 2013 (the 2013 Review) were largely positive. The review noted that ‘five years after the entry into force of REACH, it is still too early to quantify the benefits’. However, overall, the Commission
concluded that REACH was functioning well and was delivering ‘on all objectives that at present can be assessed’. Although there were some ‘needs for adjustment’ identified, the Commission concluded that it was not necessary
to enact any changes to the terms of REACH.These ‘needs for adjustment’ were as follows:
- the European Chemical Agency (ECHA) reported that a high number of registration dossiers were non-compliant, particularly regarding substance identity
- ECHA also reported that insufficient assessments of certain substances (in particular, those with persistent, bioaccumulative and toxic and very persistent and very bioaccumulative properties) were being carried out by registrants, and
- issues surrounding the content and form of extended safety data sheets, as reported by industry
A number of issues have emerged since the 2013 Review, which will be examined as part of the 2017 Review. These include:
- the impact of REACH on small and medium-sized enterprises (SMEs)—this will be addressed and any residual unnecessary administrative burdens identified
- since 2013, the knowledge base on chemicals has evolved significantly—the 2017 Review will assess whether REACH is fit to tackle new chemical issues such as nanomaterials, cumulative effects andendocrine disruptors
- the 2017 Review will also consider the need (if any) to register types of polymers, and
- concerns regarding the implementation of requirements set out in the extended safety data sheets
What sources will be drawn on for the review?
According to the European Commission, a ‘broad range of information sources’ will be used for the 2017 Review, in particular reports and studies prepared by Member States, ECHA, the Commission and external consultants. There will also
be a stakeholder consultation (see below).Some of the reports and studies that will be used are set out in the European Commission’s REACH REFIT 2017 Roadmap. These include (but are not limited to) the following:
- the report prepared following the first REACH Review in 2013
- a report prepared by ECHA regarding the use of non-animal testing methods for the purposes of REACH
- reports prepared by Member States and ECHA regarding the operation of REACH, in particular its evaluation and enforcement
- reports prepared in relation to a range of technical matters including substances of very high concern (SVHCs), registration requirements for low tonnage and registration requirements for polymers
- studies prepared in relation to enforcement, and
- reports prepared in relation to the impact of REACH and other chemicals legislation on human health, the environment and occupational health and safety
What consultation is planned as part of the review?
In terms of process, a public consultation is now running from 28 October 2016 to 28 January 2017. In particular, the consultation focusses on the effectiveness of REACH (ie the extent to which its objectives are being met), the efficiency of REACH
(the costs and benefits of implementing REACH), the extent to which REACH is consistent with current needs, and its coherence.
How does the review tie in with the fitness check on the most relevant chemicals legislation, excluding REACH which is happening in parallel?
As noted above, some of the studies that will be taken into account as part of the REACH Review 2017 are related to the current review of chemicals legislation (the chemicals fitness check). The chemicals fitness check will be participated in by the
Directorate-General for the Environment, the Directorate-General for Internal Market, Industry, Entrepreneurship and SMEs. As with the REACH Review 2017, the chemicals fitness check will assess the relevance, coherence, effectiveness, efficiency
and EU added value of the EU legislative framework on chemicals. A public consultation was also carried out in earlier 2016 (which was open until 27 May 2016).Interviewed by Nicola Laver. The views expressed by our Legal Analysis interviewees are not necessarily those of the proprietor.
Lexis®PSL subscribers can enjoy expert guidance, if you are not a subscriber, you can take a free Lexis®PSL Environment trial here.
Source: LexisNexis Purpose Built
REACH out and touch base—revaluating the EU legislative framework for chemicals
![Case Study – Proportionality and second succession claims to property (Holley v London Borough of Hillingdon)]()
by Hardwick Legal | Nov 14, 2016 | Purpose Built (LexisNexis)
How will the courts approach a social housing landlord’s discretion to allocate accommodation on second successions under Part 6 of the Housing Act 1996 (HA 1996)? Legal analysis on proportionality and second succession claims to property from the Holley and another v London Borough of Hillingdon [2016] EWCA Civ 1052) case.
Toby Vanhegan and Riccardo Calzavara of Arden Chambers, say that in a proportionality assessment under article 8 of the European Convention on Human Rights (ECHR), a long period of residence is of little consequence.
Lexis®PSL subscribers can enjoy expert guidance by accessing some of the links below. If you are not a subscriber, you can take a free Lexis®PSL Property trial here.
What was the background to Holley and another v London Borough of Hillingdon case?
This was a possession claim. The appellant was, together with his brother, the occupier of 46 Westwood Close, London HA4 7RE (the property) which was a three-bedroom house. His grandmother had been granted a secure tenancy of the property and, on her
death, the appellant’s grandmother’s husband succeeded to it. When the husband died, the appellant was unable to succeed because he would have been a second successor. The appellant applied for a discretionary tenancy but this was refused by
the respondents because he was not old enough to qualify under their policy.
The respondents sought possession. The appellant defended the claim on the basis that the respondents’ second succession policy was discriminatory on the grounds of age and had, in any event, not been properly applied to his case. He also relied
upon ECHR, art 8. The case was listed for a summary determination. At that hearing, HHJ Karp sitting at the county court at Willesden, granted a possession order.
What issues were before the Court of Appeal?
The appellant appealed on two grounds. First, the judge was wrong not to have taken account of his length of occupation of the property when deciding his ECHR, art 8 defence. Second, the respondents’ policy on second successions was unduly rigid
because of the age requirement, and this unlawfully fettered their discretion to allocate accommodation under HA 1996, Pt 6.
The Court of Appeal granted permission on both grounds. Before the appeal was heard, the respondents served a witness statement which, for the first time, exhibited a copy of their allocation scheme at the relevant time. The county court had had to make
do with a practice note about the policy in relation to second successions. The disclosure of the scheme revealed that it contained a form of exceptionality provision which gave the respondents the discretion to allocate accommodation in certain circumstances.
The witness statement said that, even applying this exceptionality provision, the respondents would not have granted the appellant a discretionary tenancy.
What did the court decide?
In relation to the ECHR, art 8 ground, the court held that Thurrock BC v West [2012] EWCA Civ 1435, [2012] All ER (D) 99 (Nov) did not decide that length of residence could never be part of an ECHR, art 8 proportionality assessment, even in second succession cases. It was held that the true analysis was that the occupier must
first demonstrate a minimum length of residence in order to show that the property is a home so that ECHR, art 8(1) is engaged.
Second, the length of residence will not on its own be sufficient to found an ECHR, art 8(2) proportionality defence in the second succession context because, if it would, then it is hard to see how the English statutory prohibition of second succession
could be compatible with the ECHR, as has previously been held.
Third, length of residence may form part of an overall proportionality assessment in the sense that all the circumstances of the case need to be considered.
Fourth, length of residence is unlikely to be a weighty factor in second succession cases because Parliament has chosen to exclude second successors whatever the length of their occupation. Accordingly, a long period of residence is of little consequence.
Were it not for the fact that the judge’s decision, albeit not properly reasoned, was plainly right on the merits, the court would have allowed the appeal on this ground. The court then carried out the ECHR, art 8 analysis that the judge should
have done, based on the information that was available at that hearing three years ago, and dismissed the appeal on this ground.
On the second ground, the court held that the appellant’s case came nowhere near the degree of exceptionality that gave him a real, rather than a fanciful, prospect of success under a residual discretion, however widely framed, as to an allocation.
However, the court said two further things about the allocation issue. First, it held that R (Ahmad) v Newham LBC [2009] UKHL 14 did not do away with any requirement for a residual discretion to be included within an allocation scheme. That case was a challenge based on irrationality rather than an unlawful fettering of discretion and, anyway,
Newham’s allocation scheme plainly contained provision for the exercise of a residual discretion. Second, the court left open the issue of whether the respondents’ allocation scheme did in fact contain a provision which gave it a full
residual discretion. Accordingly, the court dismissed the appeal on this ground too.
What should housing lawyers take from this case?
The appellant was refused permission to appeal to the Supreme Court by the Court of Appeal, but is now seeking funding to ask the Supreme Court for permission. This is on the basis that the Court of Appeal’s judgment has effectively prescribed little
weight to length of residence whatever the facts of any future case. Weight must be a matter of fact and degree for the judge to decide on the circumstances of each case. Short residence would ordinarily mean little weight, whereas long residence
should mean greater weight. It is wrong to predetermine weight in the fact sensitive exercise of a proportionality decision under ECHR, art 8.
The court’s decision to decide the appellant’s ECHR, art 8 defence on the basis of the facts as they were three years previously has also deprived him of the opportunity of having his current circumstances being considered in relation to the
issue of proportionality. There appears to be no power for the county court to do anything now to halt the eviction process, regardless of the fact that the appellant’s mental health has declined sharply and that his ECHR, art 8 defence is now
stronger than before. This would appear to amount to a procedural breach of ECHR, art 8.
There are probably two lessons to be learnt from the case. First, length of residence is a relevant circumstance to be taken into account when deciding the issue of proportionality under ECHR, art 8, but is likely to carry little weight in second succession
cases. Second, local housing authorities should probably have a provision in their allocation schemes which give them a full residual discretion to allocate accommodation in exceptional circumstances. This provision should be considered in second
succession cases.
Interviewed by Nicola Laver. The views expressed by our Legal Analysis interviewees are not necessarily those of the proprietor.
Source: LexisNexis Purpose Built
Case Study - Proportionality and second succession claims to property (Holley v London Borough of Hillingdon)
![Case Study – Proportionality and second succession claims to property (Holley v London Borough of Hillingdon)]()
by Hardwick Legal | Nov 11, 2016 | Purpose Built (LexisNexis)
When must a property seller return the contractual deposit when the buyer fails to complete? Kate McCall, partner at Shoosmiths, says a recent ruling clarifies how the courts will approach a buyer’s application for the return of a deposit where
it failed to complete—and only in exceptional circumstances will the deposit be returned.
Lexis®PSL subscribers can enjoy expert guidance by accessing some of the links below. If you are not a subscriber, you can take a free Lexis®PSL Property trial here.
What are the implications of this case for lawyers?
The case does not create new law, but serves as a useful reminder of how the courts will approach an application by a buyer for the return of a deposit, in circumstances where the buyer has failed to complete a property acquisition.
The case reiterates that a subsequent price rise and/or the fact that the seller will receive a financial windfall, will not of itself, justify the return of the buyer’s deposit. Similarly, the fact that the buyer has taken steps to rectify its
breach by attempting to complete and pay any associated costs/interest, will not necessarily sway the court. Fundamentally, deposits serve as a guarantee for performance of the obligation to complete and only in truly exceptional circumstances will
they be returned to a buyer who has failed to honour his side of the bargain.
What was this case about? Why is it significant?
The case concerned the acquisition of a property for £430,000. A 10% deposit had been paid by the buyer. Due to difficulties in obtaining funds from abroad, the buyer failed to complete the acquisition on the completion date. On the expiry of a
notice to complete, the seller rescinded the contract, and retained the deposit, as it was entitled to do under the contract. A day later, the buyer informed the seller that it was ready to complete and offered to pay interest and costs, as well as
the purchase price. The seller maintained that the contract had been rescinded, and later sold the property to a third party at a higher price, as the likelihood of obtaining planning permission had improved.
The buyer made an application to the court under section 49(2) of the Law of Property Act 1925 for return of the deposit, which was rejected. The buyer appealed on the basis that the judge had failed to take into account the economic benefit to the seller of rescinding and the
offer from the buyer to pay costs and interest in order for the original deal to proceed.
Perhaps the most interesting thing about this case is that the buyer actually raised the necessary funds and offered to complete the purchase (and pay any interest and consequential costs incurred by the seller) within a day of learning of the seller’s
decision to rescind. What is more, at that point, the seller had not suffered any material loss as a result of the failure to complete. Nevertheless, the court refused to exercise its discretion in favour of the buyer.
How helpful is the judgment in clarifying the law in this area? Are there any remaining grey areas?
The case law in this area was not particularly unclear. The recent line of authorities had made it clear that the court will typically only order the return of the deposit where special or exceptional circumstances exist that justify overriding the ordinary
contractual position that the seller retains the deposit if the buyer fails to complete. Such cases include:
What the decision is useful for is illustrating, by reference to past case law, what the ‘exceptional’ or ‘special’ circumstances referred to above might be.
The fact that the seller had not suffered any loss as a result of the buyer’s failure to complete will not, of itself, amount to a ground for ordering the return of the deposit. However, the economic impact on the seller is a factor that the court
can take into account. Other relevant considerations include:
- how close the purchaser came to completing
- the alternatives that were proposed to the seller and how advantageous they would be compared with the original contract terms
- whether the seller caused or contributed to the failure to complete and/or otherwise acted in a high-handed way
- a lack of funding owing to matters outside of the buyer’s immediate control will not normally warrant the return of the deposit
How does this case fit in with other developments in this area of law? Do you have any predictions for future developments?
Some might say that the decision is harsh, but I don’t think that it is entirely surprising—the buyer had plenty of chances to get its house in order and failed to do so (the seller had already made two offers to extend the date for completion,
and served a valid notice to complete which had expired). Nevertheless, the decision still feels slightly harsh—particularly when you consider the double whammy windfall (in the form of the retained deposit and the uplift in purchase price)
which the seller obtained as a result.
The case is, at first glance, also at odds with the decision in the Cook v Irvine case (the most recent of the authorities) referred to above. In that case, the court ordered the return of the deposit in circumstances where it was clear that the
seller knew that the buyer would be able to complete in a matter of days but had rescinded the contract anyway to obtain the benefit of rises in the market. However, the reality is that the seller in that case had acted particularly unconscionably
and there were other factors at play that seemingly swayed the trial judge (the buyer in that case had undertaken enhancement works to the property in anticipation of completing the purchase).
Ultimately, as unsatisfactory as this decision may have been from the buyer’s perspective, it at least gives practitioners relative certainty when advising on this area of the law. Had the decision gone the other way, it would have put sellers wishing
to rescind and resell to a third party in a difficult and potentially risky position—potentially stifling onward sales. For now at least, the position is clear—failure to complete will result in the buyer’s deposit being forfeited
in all, but the most exceptional and compelling cases.
Interviewed by Nicola Laver.
The views expressed by our Legal Analysis interviewees are not necessarily those of the proprietor.
Source: LexisNexis Purpose Built
Retaining deposit when the buyer fails to complete (Solid Rock Investments v Reddy)
![Case Study – Proportionality and second succession claims to property (Holley v London Borough of Hillingdon)]()
by Hardwick Legal | Nov 9, 2016 | Purpose Built (LexisNexis)
Now that the government has stated its preference for a new runway at Heathrow Airport, John Hobson QC, a barrister at Landmark Chambers, discusses the planning procedure that lies ahead.
Lexis®PSL subscribers can enjoy expert guidance by accessing some of the links below. If you are not a subscriber, you can take a free Lexis®PSL Planning trial here.
What are the key aspects of the decision?
The government’s announcement, adopting the recommendation of the Airports’ Commission, is intended to reinforce Heathrow Airport’s role as the major hub airport in the UK. The government hopes that the expansion of Heathrow which the
proposed new runway will enable, will bring forward wide economic benefits—both locally with up to 77,000 new jobs, and nationally amounting to £61bn benefits accruing. It is also claimed that it will benefit the regions by opening new
routes and improving connectivity between London and the regional airports.
Most importantly, while declaring its preference for expansion with a new runway at Heathrow, the government’s announcement explains that the expansion will only be allowed to proceed on the basis of what is described as a ‘world class package
of compensation and mitigation’. The proposed package includes a commitment to noise reduction including a proposal for a six and a half hour ban on scheduled night flights, more stringent night noise restrictions, ‘new legally binding
noise targets’, a timetable of respite for those living under the final flight path, and a pledge to provide over £700m for noise insulation for residential properties.
Additionally, there will be a redesign of the airport’s flight paths, which will be a part of a wider programme of airspace modernisation which is already needed in view of the crowded airspace above the UK.
The most controversial aspects of the government’s intention to proceed with the expansion of Heathrow are likely to be the implications for air quality. The government’s press statement states that further work in this respect has been carried
out, as recommended by the Airport’s Commission, and a new runway at Heathrow is deliverable within air quality limits. However, this is subject to the caveat that this will depend on whether ‘necessary mitigation measures are put in place’.
Moreover, the government has confirmed that meeting air quality legal requirements will be made a condition of planning approval. In so far as the measures to be adopted include offsetting emissions against reductions from other sectors, eg vehicular
traffic, this may prove difficult to achieve.
What is likely to be the proposed procedure for obtaining consent if the Heathrow expansion goes ahead?
The government has stated it proposes to follow the development consent order (DCO) procedure in accordance with the Planning Act 2008.
This procedure was introduced for the approval of nationally significant infrastructure projects (NSIP), including significant airport related development; avoiding the delays such as occurred in relation to Heathrow T5. The DCO, if granted is equivalent
to planning permission. It may also authorise the compulsory purchase of land that is needed for the implementation of the NSIP.
The application for a DCO will be made to the Secretary of State for Transport. However, before submitting the application, Heathrow Airport Ltd will be required to carry out initial consultation, including consultation with local authorities affected
and also the local community.
As part of the process local authorities will be invited to submit a written impact report giving details of the impact of the proposed development on their area.
When the Secretary of State has accepted the application, he must arrange for its examination and decide whether the application should be examined by a single Inspector or by a panel. He should decide the latter if he considers the case to be particularly
complicated. The examining authority (EA) will be responsible for determining its own procedure, but the emphasis will be to avoid delays or the sort of formalities associated with public inquiries.
A preliminary meeting will be arranged at which the EA will indicate the initial assessment of the principal issues. Local authorities and interested parties will be able to make representations as to the procedure to be followed. When hearings are held,
the procedure will be inquisitorial, with the EA conducting the questioning. Cross-examination will only be allowed when the EA considers it necessary for adequate testing of any representation, or to ensure that a party has a fair chance to put their
case.
As mentioned, the emphasis will be to avoid delay. In this regard the examination process will be subject to a strict timetable: requiring its completion within six months of the date of the preliminary hearing. Time for the completion of the examination
can be extended, but only by the Secretary of State and not the EA. The government is reluctant to extend deadlines, and in the case of the Thames Tideway Tunnel DCO, declined to do so.
On the conclusion of the examination the EA will report with a recommendation to the Secretary of State. He will then have three months to decide the application, giving reasons for his decision.
In deciding whether or not to approve the application the Secretary of State must have regard to any NPS relating to the application, and also any local impact report submitted be a local authority. The importance of an NPS in this respect is emphasised
by section 103(4) of the Planning Act 2008, which provides that the application must be determined in accordance with the NPS, except in limited specified circumstances, including where the Secretary of State is satisfied that the adverse
impact of the proposed development outweighs its benefits.
If the Secretary of State decides to approve the DCO he may impose requirements, equivalent to planning conditions, restricting the development. As mentioned below, whether an effective package of mitigating restrictions can be put in place is likely
to be one of the critical aspects of the consideration of the proposed DCO for the new runway.
When the decision is made, it can only be challenged by way of an application for judicial review brought within six weeks of the date of the decision.
Would the government need to publish a national policy statement (NPS)?
Yes, and the government has indicated that it intends to do so, publishing a draft NPS in the New Year.
As the name indicates an NPS sets out national policy for specified descriptions of development. In relation to DCOs they are of particular importance because, as mentioned above, section 104(3) provides that where an NPS has effect the decision must
be made in accordance with the NPS unless one of the limited specified exemptions applies.
An NPS is promulgated by the relevant Secretary of State. It must set out the reasons for the policy, including how it takes account of government policy in relation to the mitigation of, and adaptation to, climate change.
An NPS produced for the expansion of Heathrow as intended will be required to undergo a sustainability assessment and a strategic environmental assessment. It will also be the subject of requirements in relation to publicity and public consultation, consulting
each local authority affected and also the GLA.
Although the Secretary of State is required to lay the proposed NPS before Parliament, it is not subject to parliamentary approval. However the Secretary of State must consider and respond to any resolution of either House that is passed in respect of
the NPS.
A legal challenge to an NPS can only be brought on an application for judicial review within six weeks of the publication of the NPS.
What are the implications for local planning authorities in the area?
Local planning authorities will not have a decision-making role. Under the DCO procedure it is the Secretary of State for Transport, taking into account the recommendation of the examining authority, who will decide whether consent should be granted so
that the scheme can go ahead. Local planning authorities for the area affected, including the GLA, must however be consulted both in relation to the draft NPS and also the proposed DCO. They should also be consulted by the promoting authority, Heathrow
Airport Ltd, as to what should be included in the statement it must prepare indicating how it proposes to consult those living in the vicinity.
Also, as I’ve mentioned above, local authorities whose area is affected should be invited to submit a local impact report, which should be taken into account in reaching a decision on the application.
What happens next?
The next step is likely to be issue of a draft NPS in the New Year followed by a consultation process leading to its adoption. If it is published and survives the legal challenges that have been threatened, it will then form the basis for the application
for the DCO which is required to permit the necessary development of the construction of the new runway.
The critical aspect is likely to be the impact of increased noise and air pollution and whether the government and Heathrow Airport Ltd are able to demonstrate that they can put together, and rely upon, ‘a comprehensive package of mitigation measures’
to overcome such harmful impacts. Details of this package are intended to be included in the draft NPS consultation and are likely to prove a key battleground in the process. If it cannot be demonstrated that an effective and legally binding set of
restrictions cannot be put in place, it is likely to jeopardise the whole project as the government have made it clear that it will be a condition of approval that the air quality legal requirements will be met. It remains to be seen if this can be
achieved.
John Hobson QC’s principal areas of practice are in the fields of planning, environmental, compulsory purchase and highway law, together with a broad range of local government and public law cases. He appears in the High Court, Court of Appeal and Supreme Court, as well as public inquiries throughout the country, representing a wide variety of clients including developers, local and other public authorities.
Interviewed by Kate Beaumont.
The views expressed by our Legal Analysis interviewees are not necessarily those of the proprietor.
Sign up for a free Lexis®PSL Planning trial here.
Source: LexisNexis Purpose Built
Planning ahead for Heathrow expansion - what happens next?
by Hardwick Legal | Jul 8, 2016 | Purpose Built (LexisNexis)
Francis Ho, head of construction at Olswang, explores consortium bidding, including the benefits of consortium bidding, when it is most commonly encountered and the issues to be aware of.
What is consortium bidding?
This is when a consortium jointly tenders for a project. A consortium comprises two or more partners who combine resources and strive towards a common goal. Each consortium member operates independently within the structure and key matters such as the scope of each member’s commitment, its rights and responsibilities, and how profits and costs are to be allocated, or decisions made are dealt with through a consortium agreement signed by the members.
Consortium members frequently set up a special purpose vehicle (SPV) to enter into the contract with the client but this is not always necessary—the consortium members could alternatively contract as a partnership with the project forming part of each member’s usual business. Where an SPV is used, often the members will generally wait until a point when they are likely to be awarded the contract before establishing and resourcing it up properly.
While using an SPV can often be associated with a joint venture rather than a consortium, strictly-speaking the difference between the two is that a consortium retains assets and decision-making across its members, whereas a joint venture will place both within the SPV and have each member contribute capital to and share profits from the joint venture. It’s not unusual to find people using the terms consortium and joint venture interchangeably, though, and their boundaries are often blurred.
What are the benefits of it?
The chief advantage of a consortium is that it can exploit and highlight the particular strengths, experiences and competences of its members. This can be highly attractive to a client, especially at tender evaluation stage. Even so, consortia are often created by their members through necessity rather than choice.
By way of example, a consortium established to pitch for a hospital private finance initiative (PFI) project might include the differing disciplines of a Tier 1 contractor, investors, funders, a facilities management company and several service providers and other key sub-contractors, which can provide soft services such as catering and cleaning as well as maintenance and any other hard services. Those members can contribute their expertise to the tender and, subsequently, service delivery. For clients or new players in a market, there can be the reassurance of working alongside a renowned name in that field as part of the consortium.
Geographic reach can be another benefit—clients can have providers from different parts of the country combining with regard to a national framework. In addition, a consortium can tender for a project which its members would not have the size to service by themselves or because of technical, financial, reputational or other limitations. If there are members with overlapping expertise, then there’s the possibility of added innovation through pooling ideas and know-how. There should also be efficiencies because, with the members collaborating effectively, there should be less duplication of the work of others through monitoring and checking.
There’s scope for members to share project risks as well as tendering costs, which can often be substantial. For potential consortium members, the structures are also relatively straightforward to establish and maintain. There’s flexibility as to how involved members choose to be. Some members might provide direct services while others may prefer to be less active but contribute equity. Indeed, key members of the construction team do not need to be consortium members at all. Consortium members may also be able to exit during the lifetime of the project provided a suitable replacement can be found.
In the absence of an SPV, consortium members are taxed individually in the usual manner.
Are there any particular types of project where it is more common?
Consortia are often encountered in more significant public-private partnerships (PPPs) for central government procurement or larger local authority projects with the preference being for the authority to contract with an SPV. They also often feature for important infrastructure projects, such as HS2, Crossrail and the Thames Tideway Tunnel, where a single party is unlikely to have the resources or capacity available or sufficient appetite to bear the project risks by itself.
They are also used for large international projects where the grouping of a sophisticated international contractor and a local contractor with a strong understanding of local market conditions and access to workers usually works well. In fact, this combination is sometimes necessary in particular jurisdictions due to client or legal requirements demanding a minimum amount of local content for the project or the mandatory participation of a local partner.
What issues does it give rise to?
Funders occasionally number among the consortium members but otherwise third party debt finance can be harder to obtain without an SPV being established. Banks prefer the ease of dealing with a single entity, which they can directly provide financing to and which can then hold and charge project assets (assets in a consortium are retained by its members). Clients can also find this a distraction which is why the majority of authorities in PPPs require the contract to be entered into by an SPV rather than all the consortium members.
A fundamental question is the extent to which the consortium members are liable to the client, to third parties and even to each other for their own non-performance or the non-performance of the consortium. The last point is a particular issue where each consortium member agrees to joint and several liability under the consortium’s contract with the client. The allocation of liability and indemnification between members is an issue that should be addressed early on. A member should also be aware of any reputational consequences in the event the consortium performs badly in the project and it becomes associated with such failure even where its culpability is minimal.
When competitors or potential competitors team up in a consortium, there is the risk that competition can be distorted because, in theory, rivals are being taken out of the market. Consortium members should ideally pre-empt any such concerns by assessing those dangers themselves early on and confirming how the benefits that the consortium arrangement brings to the client outweigh the possible risks, including whether or not any consortium member would have been capable of tendering for the contract by itself.
Are there any common pitfalls?
Because a consortium is based on collaboration between its participants, a major factor in its success will be whether they all share a similar vision for the project and can work together well. A substantial amount of trust and open-mindedness to new approaches is necessary. That makes it less likely that a consortium can be easily put together between organisations that are insular, have weak knowledge of each other or possess greatly contrasting cultures. Moreover, strong and clear leadership is important to help make choices and drive matters forward. Sadly, decisions are frequently made ad hoc rather than in an organised manner. To reduce this prospect, a steering committee should be formed in which each member is represented which is charged with delivering a successful project and which can convey information and approve day-to-day decisions on the members’ behalf.
The members ought to establish what each member’s role and responsibilities are and deal with governance and management of the consortium. For example, in a PPP framework, it’s common for the contractor to remain in the structure only until construction of the facility is completed.
It’s strongly advisable for members to take legal advice early on regarding the consortium agreement and other documentation. This will help flush out any possible problems and misunderstandings and oblige the members to come to terms with how the consortium structure will operate and what resources are necessary to be committed at each stage.
What concerns will the procuring entity have where dealing with a consortium bidder?
Some of the issues that will concern clients have already been mentioned. In addition to these, clients may wish to consider whether a consortium is really the best arrangement for their project. A notable alternative is using an alliancing or partnering structure, which may help to deliver better client value. It could also overcome a potential difficulty with joint bidding where the consortium’s presence makes the supply chain aspects become less transparent to clients. It was similar concerns, as well as the suspicion that equity investors were profiting unduly as a result, that led to the government overhauling its PFI model to devise ‘PF2’. Including provisions for client-consortium collaboration would help build greater trust between the parties.
Clients will be keen that the consortium agreement and any other contracts between consortium members (such as the shareholders’ agreement) do not cut across the provisions in their own agreements with the consortium, for example, in relation to ownership and licensing of intellectual property.
A further concern that clients may have is over communication with a consortium since this may already be weak among the members. It is therefore prudent for them to set out in their agreement with consortia protocols for project reporting.
How is confidential information protected?
Naturally, consortium members are likely to come into and share commercially-sensitive information about each other’s operations. Sensitive commercial information should only be disclosed to the extent necessary. It’s common for members to enter into binding non-disclosure agreements at an early stage dealing with how commercial data and financial and technical information are to be protected and retained. Alternatively, confidentiality could be addressed as legally binding obligations in the letter of intent or memorandum of understanding that serves as the heads of terms for what will eventually become the finalised consortium agreement. In addition, members may either be asked to get their suppliers and sub-contractors to sign up to equivalent obligations or to otherwise guarantee their compliance.
When the consortium agreement is executed, those confidentiality duties will generally be subsumed into it. Further requirements may be added in relation to publicity matters, such as the co-ordinated issue of press releases and the conduct of any media interviews.
Interviewed by Nicola Laver.
The views expressed by our Legal Analysis interviewees are not necessarily those of the proprietor.
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Source: LexisNexis Purpose Built
Consortium bidding in construction projects
